Mortgages - Qualifying for a loan
- Where do I get information on mortgages?
- How do I find the best loan?
- How do I find a list of mortgage brokers or lenders?
- How do I find information on consumer credit laws?
- How do I get a copy of my credit report?
- Who regulates lenders
Q. Where do I get information on mortgages?
A. To obtain information on mortgages you can check out the following sources:
- Mortgage Bankers Association of America - 202.861.6500
- American Bankers Association - 202.663.5000Q. How do I find the best loan?
A. There is a booklet which may help you put out by the Mortgage Bankers
Association of America entitled "How to Shop for a Mortgage". Call
202.861.6500.Q. How do I find a list of mortgage brokers or lenders?
A. Contact the National Association of Mortgage Brokers at 703.610.9009.Q. How do I find information on consumer credit laws?
A. Contact the National Foundation for Consumer Credit. Call: 301.589.5600.Q. How do I get a copy of my credit report?
A. There are three main national credit reporting agencies. Call any of them at:
Equifax - 800.685.1111
Experian - 800.392.1122
Trans Union - 312.408.1050A. There are 3 bodies that oversee the lenders and your state deparments of real estate or commerce may also regulate the lenders in your area.
Comptroller of the Currency, Compliance Division, Washington, D.C. 800.613.6743
Office of Thrift Supervision, Consumer Affairs, Washington, D.C. 202.906.6237
Federal Deposit Insurance Corp., Consumer Affairs, Washington, D.C. 800.934.3342
Can a HUD home be bought for only $100 down?
A: If you happen to be looking for a bargain, you might be able to buy a foreclosure property for as little as $100 down. This would be a property acquired by the U.S. Department of Housing and Urban Development.Down payments vary and could depend on whether the property is eligible for FHA insurance. If the property does not qualify the down payment would range from 5 to 20%.
When you make an offer, an "earnest money" deposit of 5% of the bid price must accompany the offer. The deposit cannot exceed $2000 and it cannot be less than $500.
Another department that offers foreclosures is the VA or the U.S. Department of Veterans Affairs. The down payment amount can be as low as 2% if you are going to occupy the home, otherwise you are considered an investor and may be required to pay up to 10% of the purchase price.
To request a current listing of VA foreclosed properties call 800-827-1000.
FYI: Foreclosure properties are sold "as is", which means that repairs to the home are limited and no structural or mechanical warranties are implied.
Q: What are rates for FHA and VA loans?
A: The FHA stopped regulating rates in 1983 and the VA did the same shortly after. Shop around for the best rate.Q: How do you find government-repossessed homes?
A: HUD-owned properties can only be purchased through a licensed real estate broker. HUD pays the broker's commission up to 6% of the sales price.Check with the U.S. Department of Housing and Urban Development .
Q: How does FHA work?
A: FHA requires approximately 3 to 5% cash down and loan limits vary depending on the county where the property is located. FHA loans administered by HUD are originated by private lenders.For more information contact lenders who offer FHA loans, a regional HUD office or request the booklet below:
"FHA Forms, Booklets and Publications"
U.S. Department of Housing and Urban Development Printing Branch
Room B-100
451 7th St.
Washington, DC 20410 or call (800)767-7468.Q: What government programs are there for rehab homes?
A: HUD's Section 203(K) is designed to facilitate major structural rehab of houses with one to four units that are more than one year old. Condominiums are not eligible.This loan is usually done as a combo loan to purchase the property and rehabilitate it. You can also refinance a temporary loan to buy the property and do the rehab. The other option is to do a rehabilitation-only loan.
Proposed work must be submitted for architectural review and cost estimation in the way of plans and specifications. The mortgage proceeds are advanced periodically during the rehab period in order to finance the construction costs.
You can obtain a list of participating lenders by calling HUD at: 202-708-2720
The Federal Housing Administration's Title 1 FHA loan is another program you could look into.
Q: What can you tell me about the Community Home Buyers program?
A: This program is sponsored by the Federal National Mortgage Association, also known as Fannie Mae.The program has an income cap of 120% of the area's median income and the borrower must attend a seminar on home ownership and the home buying process.
This loan program allows for 97% financing with the borrower putting down as little as 3% of his own money.
Call Fannie Mae at 800-732-6643 for additional information.
Q: What is Fannie Mae's low-down program?
A: There are two new programs. One to address many first time home buyers struggle to save money for the down payment, allowing 97% financing and also known as the Community Home Buyers ProgramTwo new programs will help potential buyers overcome two of the most common obstacles to home ownership, low savings and a modest income.
The second program is called the Start-Up Mortgage which assists buyers with a 5% down payment.
Call Fannie Mae at 800-732-6643 for additional information.
Q: What is Fannie Mae?
A: This is a congressionally chartered secondary-mortgage market company that buys loans from private lenders. It's influence on the mortgage market is huge.Call Fannie Mae at 800-732-6643 for additional information.
What is a reverse mortgage loan?
A: This is a type of loan available to those who are considered equity-rich. You can borrow against the equity you have built up over the years and no repayment is necessary until you sell the property or move. If you die prior to the property being sold, the loan is repayed through your estate plus any interest that has accrued.Be sure to have the documents reviewed by either an attorney or another expert.
- Where do I get information on refinancing?
- Can I refinance after bankruptcy?
- Is there a better time to refinance?
- Where do I get information on refinancing?
Q: Where do I get information on refinancing?
A: You may find the following booklet helpful: "A Consumer''s Guide to Mortgage Refinancings". It can be obtained at the address listed below:Federal Reserve Bank of San Francisco
Public Information Department
P.O. Box 770
San Francisco, CA 94120
or call (415) 974-2163 to order.Q: Can I refinance after bankruptcy?
A: This could be difficult after a bankruptcy. You may want to talk with your lender first if you are considering bankruptcy to explain your situation. Your lender may be able to accommodate you and refinance your loan if you have been current on payments.Q: Is there a better time to refinance?
A: Typically, when the interest rates fall 2% below your current interest rate on your mortgage.You should also weigh in the factor of the length of time you anticipate holding on to the property. Usually if you plan on keeping the property 3 to 4 years, then refinancing may be worth your while.
Upfront costs may be involved, so check with your lender. Many times these costs can be rolled into the new note.
Q: Where do I get information on refinancing?
A: You may find the following booklet helpful: "A Consumer''s Guide to Mortgage Refinancings". It can be obtained at the address listed below:Federal Reserve Bank of San Francisco
Public Information Department
P.O. Box 770
San Francisco, CA 94120
or call (415) 974-2163 to order.
- Is PMI always required on low-down home loans?
- How do I get PMI dropped?
- What is Private Mortgage Insurance?
- Where can I obtain information on PMI?
Q: Is PMI always required on low-down home loans?
A: Private mortgage insurance or PMI, is usually required on very low-down loans although a number of private lenders are loosening up on their requirements.Q: How do I get PMI dropped?
A: The loan-to-value ratio must be less than 75%. Rules differ state to state. Some states say the loans have to be at least 2 years old and that the borrower can not have made any late payments in the last year in order to have the PMI dropped. Some state disclosure laws require the lenders to notify the borrowers after the close of escrow as to whether the borrow has the right to cancel the PMI. Please note that this may be a federal requirement, too.Q: What is Private Mortgage Insurance?
A: This insures the lender against a default and is required when the borrower is putting down less than 20% of the purchase price.The costs of PMI vary from one mortgage insurance firm to another. Premiums usually run around .50 percent of the loan amount for the first year of the loan then are a bit lower in subsequent years.
In most cases the PMI can be dropped after the loan-to-value ratio drops below 80%. Check with your lender on the procedure to follow to have the PMI removed when your equity reaches 20%.
You may also want to consider refinancing your property if you have made improvements and believe that your equity now equals 20%. This will eliminate the PMI also.
Q: Where can I obtain information on PMI?
A: You will find tips in the following booklets put out by the Mortgage Insurance Companies of America located at 805 15th St. NW, Suite 1110, Washington, DC 20005. You can call them at 202-393-5566 and order one of the following:
"A Mortgage Insurance Guidebook,"
or "How to Buy a Home with a Low Down Payment,"
Q: When looking for a home loan, what is the first step I should take?
A: The first step is to get prequalified for a loan. This will let you know exactly how much house you can afford. This is a simple process and can be done over the phone or on the internet.Q: If I'm a first-time home buyer, how do I qualify?
A. A lender defines a first-time home buyer as someone who has not owned any real estate during the past three years. This is verified by the examination of your income tax returns.Q: How do I find out what I can afford?
A: That depends on how much income and how much debt you have. Lenders do not want borrowers to spend more than 28% of their gross income per month on a mortgage payment or more than 36% on debt.Check with several lenders before you begin searching for a home. They can roughly calculate what you can afford and prequalify you at the same time.
There are 6 factors involved:
Gross income
The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
Outstanding debts
Your credit history
The type of mortgage you select
Current interest rates
Another number lenders use to evaluate what you can afford is the expense-to-income ratio. This is determined by calculating your projected monthly housing expense, consisting of the principal and interest payment on your new home loan, property taxes and hazard insurance (also known as PITI). This ratio should be between 28 and 33 percent. Your total debt-to-income ratio should be between 34 and 38 percent.
Q: Are there benefits of pre-paying the mortgage?
A: Yes, you can save thousand of dollars and shave off years from the length of your loan.The total savings potential also depends on how long you want to stay in the home.
Be sure to check with your lender on the mortgage terms of your loan and if there is a penalty for prepayement.
- Is there such a thing as no-down payment home loans?
- Where can I find low-down-payment home loans?
- Who do I call for a low-down-payment loan?
- What is considered a low down payment?
- Can you explain how some of the low-down programs work?
Q: Is there such a thing as no-down payment home loans?
A: There is but it's not easy finding these loans and they can be risky in some cases.Q: Where can I find low-down-payment home loans?
A: A number of private lenders offer these types of loans as well as government entities such as HUD, FHA and Fannie MaeA host of private lenders offer low-down-payment loans. In addition, there are government programs to help cash-strapped buyers.
Q: Who do I call for a low-down-payment loan?
A: You have several programs available.-Start by calling a local lender and inquiring about an FHA loan
-Veterans who qualify can buy a home with no money down through the Department of Veterans Affairs. They can be reached at 800-827-1000 for additional information on their programs.
-For VA foreclosures call 800-827-1000 and request a current listing.
-For FHA properties, call your local HUD office.
-Check with your local city and county housing departments because they may offer special housing loans
Q: What is considered a low down payment?
Can you explain how some of the low-down programs work?
A: Most programs of this nature have special requirements which can range from requirements of being first-time home buyers to limits on family income.The requirements vary from government programs to city and county programs and some city and county programs are available only for targeted neighborhoods, an effort by local leaders to try and spark reinvestment or to increase of the homeownership rate
Private programs insist that you have good credit and that you obtain PMI
A publication you could request from Freddie Mac is: #183, "Unlocking the Doors to Homeownership". Call 800-FREDDIE
Q: What is a gift letter?
A: This is a letter to the lender stating that no repayment of the "gift" is expected. Within the letter you should state the amount of the gift, the date the funds were transferred and the donor's name, address, telephone number and relationship to the borrower.The lender can ask for 2 or 3 months worth of statements for the account where the down payment funds are located. Sometimes verification of the source is needed.
Gifts can come from family, friends, employer, church, municipality or nonprofit organizations but stricter restrictions on the gifts are required by lenders in cases of friends or relatives, other than parents.
Check with your lender to learn their restriction.
- What is a mortgage lock-in?
- Can I monitor my ARM loan?
- When using seller financing, how are the rates set?
Q: What is a mortgage lock-in?
A: A lock-in ensures you that the same rate will be available when you need it.
They make sense when you expect rate to rise during the next 30 to 60 days, which is the usual length of time that lock-ins are available.
Some lenders require borrowers to pay a lock-in fee so be sure to check that the rates and points are guaranteed and that your lock-in period is long enough. If the lock-in expires, lenders may offer the loan based on the prevailing interest rate and points.
For additional information you can request the publication named: "A Consumer''s Guide to Mortgage Lock-Ins". This is published by the Federal Reserve Board and Office of Thrift Supervision, Washington, D.C. It can also be obtained from the Federal Reserve Bank of San Francisco, Public Information Department, P.O. Box 7702, San Francisco, CA 94120; or call 415-974-2163 to order.
Q: Can I monitor my ARM loan?
A: There is a book published by Consumer Loan Advocates that has form letters and worksheets to help people who want to check mortgage payments or adjustments on their own. For $19.95 + $4.00 shipping and handling you can order one by contacting:Consumer Loan Advocates
655 Rockland Road
Lake Bluff, IL 60044
(847) 615-0024.
Q: When using seller financing, how are the rates set? |
A: The interest rates on this type of financing are negotiable. You should check with your Realtor, lender or mortgage broker to determine the current rate on institutional loans.Typically, seller financing costs less than convention financing because loan fees typically are not charged. Also remember that seller's aren't usually willing to carry loans for a lower rate than they would earn if their money was invested elsewhere.
How do I know whether to choose a fixed or an adjustable rate?
If I have the money, is it better for me to put more or less down when purchasing a home?
How do I know whether to choose a fixed or an adjustable rate?
Q: What is APR?
A: This is the relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the federal Truth-in-Lending Act and is also known as the Annual Percentage Rate.APR is the actual yearly interest rate paid by the borrower, figuring in the points charged to initiate the loan and other costs. The APR discloses the real cost of borrowing by adding on points and also by factoring in the assumption that the points will be paid off incrementally over the term of the loan and is usually about .5% higher than the note rate.
Q: How do I know whether to choose a fixed or an adjustable rate?
A: This is truly a matter of personal choice. Fixed rates offer stable payments while adjustable rates offer lower initial payments.Risk is involved when you select an ARM because rates may go up. Statistics show that home buyers choosing this rate have saved thousands of dollars.
Another thing to consider is the length of time a buyer plans to own the home. Owning the home, for example, for 3 or 4 years, makes an ARM a sensible choice.
To obtain additional information obtain the Consumer Handbook on Adjustable-Rate Mortgages. Call 415-974-2163
Q: Can you tell me if interest rates are negotiable?
A: Established lenders are less likely to negotiate but there are some lenders who are willing to negotiate on loan rates and points. It certainly pays to shop around for rates and know a bit about the market before you go in to speak with a lender.Interest rates are much more likely to be negotiated on purchases that involve seller financing. Remember to check published rates in local papers or internet sites.
Q: When using seller financing, how are the rates set? |
A: The interest rates on this type of financing are negotiable. You should check with your Realtor, lender or mortgage broker to determine the current rate on institutional loans.Typically, seller financing costs less than convention financing because loan fees typically are not charged. Also remember that seller's aren't usually willing to carry loans for a lower rate than they would earn if their money was invested elsewhere.
Q: If I have the money, is it better for me to put more or less down when purchasing a home?
A: Honestly, it depends on who you talk to and your situation.If you put down as little as possible, this will allow you to take advantage of the tax benefits of home ownership such as mortgage interest and property taxes, which are fully deductible from state and federal income taxes. Plus, you'll have a reserve for unexpected improvements that may come up.
On the other hand, it is also considered prudent to make a larger down payment in order to reduce the amount of debt that you will be financing.
Q: How do I know whether to choose a fixed or an adjustable rate?
A: This is truly a matter of personal choice. Fixed rates offer stable payments while adjustable rates offer lower initial payments.Risk is involved when you select an ARM because rates may go up. Statistics show that home buyers choosing this rate have saved thousands of dollars.
Another thing to consider is the length of time a buyer plans to own the home. Owning the home, for example, for 3 or 4 years, makes an ARM a sensible choice.
To obtain additional information obtain the Consumer Handbook on Adjustable-Rate Mortgages. Call 415-974-2163
Q: What is a wrap-around loan?
A: This is a seller financing method and is risky if the underlying first loan has a "due on sale" clause. The reason for this is because the loan might be called due when the first lender becomes aware that the property has transferred title.Also, the seller usually incorporates a late charge in order to encourage the buyer to make monthly payments on time.
Check with an attorney before signing this type of document.
Q: Can you tell me if FHA loans are assumable?
A: This is only permitted on loans which have a 'subject to transfer' clause. Discuss any possible risks with your lender and consult an attorney before signing the final agreement.Q: How can I find out if a loan is assumable?
A: You must look at the loan agreement to determine this. The next step is to speak with the lender about specific requirements based on the home's value.An assumable loan allows one borrower to take over a loan from another borrower without changes in the loan terms. These types of loans are not very common in a low interest rate environment.
Q: Are there any risks with "b" and "c" loans?
A: You will find that the major risk is the cost of loan and you could find yourself locked into a long-term loan with ridiculous fees and interest rates.If negative information on your credit report may be about to disappear in the next couple of years or you expect your income to increase a significant amount, a non-conforming loan without excessive prepayment penalties can be an excellent source. As soon as you would qualify for a convention loan you can obtain one and in the meantime you would be establishing equity.
What methods are used to determine the value of a home?
Q: What methods are used to determine the value of a home?
A: There are several ways to determine the value of a home.One method is an appraisal which is a professional estimate of a property''s market value. The cost for an appraisal varies depending on the price of ht home but can range anywhere from $300 up to $250,000.
Another method is called a comparative market analysis. This is an informal estimate of the market value and is performed by a real estate agent. Most agents will offer you a free analysis.
Yet another method is a comparable sales report. These are available for a fee from private companies the specialize in real estate data.
